A Guide to Training & Competence

The FCA TC Sourcebook requires all staff of a regulated firm to be competent for their role. This applies from the Chief Executive to the newest administrator. The professionalism element of the Retail Distribution Review introduced the requirement for all advisers (those registered as CF30) to be a member of an Accredited Body and hold a qualification that meets level 4 requirements of the Qualification and Curriculum Authority (QCA). Paraplanning is now seen as a profession in its own right as well as a career progression towards becoming an adviser. There is a list of Accredited Bodies in Appendix 6 of the TC sourcebook, which can be accessed here.

The level 4 qualification is just the beginning. An adviser is required to hold a valid Statement of Professional Standing (SPS) issued by the Accredited Body which is renewed annually based upon meeting their requirements to verify ongoing competence.

Ongoing competence is maintained by an adviser undertaking quality and relevant Continuous Professional Development (CPD) – the Accredited Body will specify how much CPD they expect an adviser to undertake and how they want it recorded. Many of them prefer CPD to be recorded using a tool on their own website to allow periodic audit.

All this points towards a firm creating a formal Training and Competence Scheme to document how it will recruit, train and develop staff whether they are undertaking Controlled Functions or not. For firms of a certain size, it will give staff the potential of a career pathway and may help with staff retention.

A firm should document its minimum requirements for assessment of competence in its Training & Competence Scheme. The breadth and depth of the scheme will depend on the size of the firm and the proposition it offers to its clients.

A typical T & C Scheme will be split into a number of sections:

  • the minimum standards a firm requires a new entrant to demonstrate during the recruitment and induction process;

  • how you will measure the competence of new entrants;

  • how trainees will attain competence;

  • how staff will be expected to maintain competence (including CPD requirements);

  • how staff will demonstrate on going competence (e.g. annual testing, observed client meetings);

  • Key Performance Indicators;

  • Supervisory Requirements.

A firm should consider how it will record evidence of competence of its staff, will this be a manual system or should it invest in an electronic system that can link to the Accredited Bodies.

You need to consider the scope of advice being given by the firm and which of your advisers are going to require additional qualifications. Do you want to apply for Chartered Status for your firm and if so what are the requirements of the Accredited Body you should be considering.

In addition to the on-going competence of advisory staff, you should consider your requirements for measuring the competence of non-advisory staff. Do you want to offer a career path for administrators to train to become Para-planners and for paraplanners to become advisers and how this will work in practice.

As with all compliance with regulation, a T&C scheme needs to be proportionate and appropriate for the size of your firm. It is not ‘one size fits all’. When constructing a T&C scheme, you need to consider:

  • The number of staff in your firm;

  • The areas of advice you offer;

  • Your client and prospect base;

  • Your plans for future growth.

Historically, a T&C Scheme has focused on registered individuals giving regulated advice.

New Entrants

As a firm you will need to define how you are going to recruit new advisory staff. Whether they are to be experienced, qualified advisers, or you are looking to promote paraplanners, you need to define how you are going to assess their competence at the point they join your firm, identify any training needs and then an initial supervisory regime to enable you to confidently sign them off as competent.

How will you assess the base generic knowledge and then introduce firm specific knowledge will you require validation tests to demonstrate understanding and application.

How will you ensure competent practical application with clients, how many observed meetings will you require, will these cover the full advice process? What standards are you going to set as baseline competence?

Continuous Professional Development

All of the accredited bodies will have CPD requirements which will inform the minimum amount of training and development an adviser needs to undertake. The subject matter will depend upon a training needs analysis and agreed development requirements at appraisal. Some CPD will be linked to qualifications, some will be informal and research based and some will be through formal seminars and workshops. All CPD must be relevant to the areas of advice given to clients by the firm.

Maintaining and Demonstrating Ongoing Competence

Any T&C scheme will document how, in addition to CPD, advisers will maintain and demonstrate knowledge and competence are maintained. This will usually involve annual knowledge assessments, observed client meetings and a discussion of professional development at appraisal. It may be that a training needs analysis is revisited and updated. This will inform the adviser’s training and development activity for the coming year.

Key Performance Indicators

Every firm should define the minimum standards required of regulated advisers against which performance is measured on a regular basis. These should include qualitative as well as quantitative measures. The T&C scheme should then define remedial activities should these KPIs not be met.

Some schemes use a traffic light system to risk rate advisers which will inform the level of supervisory activity undertaken by the T&C Officer with the adviser to raise performance back to the required standards. Accurate and comprehensive record keeping is essential for both regulatory and HR purposes. Many appraisal and reward systems use supervisory data as part of the qualitative assessment of performance as the FCA looks for firms to reduce the reliance on purely sales performance to inform the amount of bonus and/or pay rise.

Supervisory Requirements

The supervisor should be independent of sales line management, he should have a defined span of control and firms with more advisory staff may have a lead supervisor (the T&C Officer or Manager) who may work with senior staff and have one or more T&C Supervisors reporting to him.

All this points to the need of a firm to have a comprehensive Training & Competence Scheme delivered by a Training and Competence professional who is independent of the sales management line. Some firms may choose to outsource this resource.

#UKFinancialServices #Compliance #TC #Training #Competence

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